Tom Pepinsky

Author: tompepinsky

  • Cowen on Keynesians on China

    Internet debates on economic policy, economic thought, and current events are frustrating. Today’s exhibition: Tyler Cowen on Keynesians on China.

    Cowen, of Marginal Revolution fame, recently published a timely essay at the New York Times on how different schools of economic thought interpret the coming economic slowdown in China. Keynesians, he writes,

    would argue that Beijing has the tools to stoke aggregate demand. It could, for example, adjust interest rates and bank reserve requirements, instruct state-owned banks to maintain lending, or deploy some of its $3 trillion in foreign exchange reserves. The government also appears to have many shovel-ready construction and infrastructure projects that could help the economy glide to a soft landing and then bounce back.

    Austrians, on the other hand, would probably suggest that

    there is no way for China to make good on enough of its oversubsidized investments. At first, they create lots of jobs and revenue, but as the business cycle proceeds, new marginal investments become less valuable and more prone to allocation by corruption. The giddy booms of earlier times wear off, and suddenly not every decision seems wise. The combination can lead to an economic crackup — not because aggregate demand is too low, but because the economy has been producing the wrong mix of goods and services.

    There is an interesting point in this essay about Austrian economics perhaps being more applicable in China than in the developed West. But this is overshadowed by Cowen’s subtle bait-and-switch. Keynesians probably believe that Beijing has the tools to stoke aggregate demand, yes. But most sensible Keynesians (and certainly those who Cowen has in mind) also probably believe that stoking aggregate demand is itself not enough to avoid the coming “economic crackup,” for most of the very reasons that Cowen has attributed to the Austrians. Don’t take it me. Get it right from the source from Nouriel Roubini or Paul Krugman.

    Maybe these Keynesians would be more optimistic about China’s ability to “bounce back” this if they weren’t so busy observing that the very tools that the Chinese need to employ are made impossible by financial repression, massive corruption, and opaque decision making. But that’s an altogether different conclusion.

    Perhaps these Keynesians are focusing merely on the Chinese economy’s ability to avoid a crisis in the short term by stoking aggregate demand, without passing judgment about whether the specific tools employed would be sustainable over the long term. That too is a different conclusion. And after all, we actually know what would happened had China stoked aggregate demand in 2008-09. They did. It worked. In the short term.

    Cowen seems convinced that there is some fundamental reason why Austrians can see the reasons for coming ruin in China, but Keynesians cannot, even though he admits that “economists of all stripes agree that China may be in for a spill.” But this does not survive even a cursory reading of Keynesian policies, or of their contemporary advocates diagnoses of China’s problem. It’s a mistake to turn this into a battle between the Keynesians and the Austrians. If China cracks up, it’s not a victory for the Austrians and a defeat for the Keynesians. And similarly, if China doesn’t, both the Keynesians and the Austrians have some explaining to do.

  • Chinese Indonesians, Then and Now

    A hot issue in Indonesia right now is the gubernatorial race in the Jakarta Capital District. The race pits incumbent governor Fauzi Bowo and Nachrowi Ramli (Foke-Nara) versus Joko Widido and Basuki Tjahaja Purnama (Jokowi-Ahok). Ahok is Chinese Indonesian, and Christian. And that has been interpreted by some in Indonesia (like the ridiculous Rhoma Irama) as unacceptable, a fact which I, myself, find unacceptable.

    Soe Tjen Marching has a nice commentary in a piece (registration required) on Chinese Indonesians at Koran Tempo, which you can also read for free at IndoPROGRESS. Unfortunately for non-specialists, it’s in Indonesian. Here’s how it starts.

    Apa Beda Marissa Haque dan Ahok atau Basuki Tjahaja Purnama? Banyak.  Tentunya tidak perlu saya sebutkan lagi. Tapi, apa persamaannya? Mereka sama-sama mencalonkan diri menjadi wakil Gubernur (Banten dan Jakarta). Marissa dengan leluasa menyatakan tentang kakeknya, Siraj Ul Haque, yang berasal dari Uttar Pradesh, India Utara. Bahkan dalam salah satu blognya, dijelaskan bahwa kakeknya adalah orang India asli, sedangkan ayah mereka adalah orang Pakistan. Namun, ini tidak menjadi masalah. Marissa Haque tetap orang Indonesia. Bandingkan Marissa dengan Ahok. Berkali-kali Ahok menekankan bahwa dia adalah orang Indonesia.  Seakan dia harus berjuang hanya untuk mendapat pengakuan untuk hal yang satu ini.  PR yang tidak perlu dikerjakan oleh Marissa saat ia mencalonkan diri sebagai Wagub.

    What are the differences between Marissa Haque and Basuki Tjahaja Purnama, a.k.a. Ahok? Lots. I needn’t say much more. But what are the similarities?  They both are candidates to be Vice Governor (Banten and Jakarta). Marissa openly notes that her grandfather, Siraj Ul Haque, comes from Uttar Pradesh. In fact, in a blog post, it was revealed that her grandfather was an Indian, while dad was Pakistani. But no problem. Marissa Haque is still an Indonesian. Compare Marissa with Ahok. Over and over again, Ahok emphasizes that he is an Indonesian. He has to struggle even to get people to recognize that. This type of PR isn’t necessary for Marissa as she campaigns to be Vice Governor.

    The rest of the piece is an interesting and at times personal commentary on the problems that Chinese Indonesians face in Indonesia today: problems of recognition as Indonesians, problems which other “non-indigenous” Indonesians whose ancestors hail from the Middle East or South Asia never face. She makes a point that the Dutch colonial government’s policy of identifying Chinese migrants as either indigenous (pribumi, at that time Inlander) or Chinese, and forcing them to choose appears to have had a long lasting effect: Rasisme yang ditanamkan oleh pemerintah kolonial Belanda = the racism that was planted by the Dutch colonial government. This despite the fact that many, many Indonesians probably have at least a smidgen of Chinese, Indian, Arab, Persian, Dutch, or Portuguese ancestry.

    (I’d emphasize that that is probably even more true in places like Jakarta. For instance, without commenting too much about  what we can conclude from people’s appearance, take a good look at Nachrowi Ramli, a typical example of what Indonesians call the “Betawi” or “Batavian” ethnic group.)

    But Dutch racism cannot explain everything. The Indies had plenty of non-Chinese foreign populations, and on the whole, these other foreign Easterners (andere vreemde Oosterlingen) have assimilated much more easily. The Chinese are uniquely excluded here, which is exactly why Marissa Haque is an interesting foil for Ahok.

    Building on that observation, I have been working over the past months on two projects that look at ethnicity in Indonesia, one which looks at ethnic heterogeneity across the archipelago, and another that focuses on foreign migration to colonial Java. With an undergraduate RA, I recently compiled some data from the 1930s census of colonial Java, which allows me to count, as of 1930, the number of Chinese in any district (today this is approximately the kecamatan). Here are the top five by Chinese population and the top five by percentage Chinese.

    District Regency Chinese Population (1930)
    1. Batavia Batavia 47087
    2. Soerabaia Soerabaia 36866
    3. Semarang Semarang 27423
    4. Weltevreden Batavia 24601
    5. Tangerang Batavia 19734

    Batavia, now divided between the provinces of Jakarta Capital District and Banten, really had a lot of Chinese people. This is also true in percentage terms.

    District Regency Percent Chinese (1930)
    1. Batavia Batavia 25.4
    2. Semarang Soerabaia 12.6
    3. Soerabaia Soerabaia 11.9
    4. Maoek Batavia 10.9
    5. Weltevreden Batavia 9.8

    There is, unfortunately, no source of comparable data for the “outer islands.” Within Java, there is a pretty strong correlation between Chinese settlement and settlement by the “other foreign Easterners.” More on this some other time.

    But moving ahead, we know that today there are still lots of Chinese, in Jakarta and elsewhere. The 2000 census counted roughly 2,300,000 Chinese in Indonesia, with the most concentrated in the following kecamatan (all urban) areas

    Kecamatan Kabupaten Percent Chinese (2000)
    1. Pasiran Kota Singkawang 43.3
    2. Tujuh Belas Bengkayang 15.3
    3. Taman Sari Jakarta Barat 15.1
    4. Tanjung Balai Selatan Tanjung Balai 15.0
    5. Pontianak Selatan Pontianak 12.9

    Recall that these only count Indonesians with “Chinese” on their ID card who identify as Chinese rather than something else. There is essentially no mechanism in the census that I’m aware of to allow people to reveal the fact that grandma or grandpa was Chinese, and even if there were, I’m not sure people would want to, or even that everyone knows. (I tried this once in a survey and didn’t get anywhere.)

    What I find interesting of the criticisms of Ahok is that they tend not to specifically identify his ethnic background as the problem, although there are some exceptions. Instead, they focus primarily on the fact that he is Christian. I tend not to infer too much from the nasty things that Indonesian public figures say during campaigns—Foke-Nara are behind in the polls, and like all politicians everywhere they have handlers and hangers-on who say ignorant things because they think that they are helping—but it is interesting that the language that the anti-Jokowi-Ahok crowd has settled on is more religious than ethnic in tone. Even if Christian is just broadly understood to be a code word for Chinese in this context, it’s still interesting, because Indonesian politicians have historically not been too shy about speaking out against Chinese Indonesians.

    It is also interesting because Jokowi-Ahok is supported by Partai Gerindra, founded by Prabowo Subianto, Soeharto’s son-in-law and a former general who many hold at least partially responsible for the anti-Chinese riots in Jakarta in 1998.